Monthly post:
Weekly post:
Long-term post:
Yesterday the bad news was good news as expected and explained premarket.
We have PPI today and CPI tomorrow.
As written in the weekly post, veta supply (positive vega decay) that caps the volatility exponentially diminishes today into Thursday, and will be gone tomorrow. However, vomma supply is still with us that slows down ‘vol up’ moves, preventing vol squeezes.
So it gives room for volatility to go up, but not much today, rather tomorrow, however in a managed, dampened way.
I will show you what ranges and levels the market expects under this condition…
Why is it important?
Because in a ‘bad news are good news’ regime, good news are bad news. And market doesn’t expect disinflation. The sentiment on growth scare is short-term bullish as it forces the Fed to ease, but inflationary numbers narrow the room for ease and increase the odds of hawkishness beside a cut.
However, the underlying growth scare is stronger and dominates the longer-term sentiment, so the effect of ‘good news = bad news’ is not too big, but we will see how today the bond market closes.
Tariff pass-through is now showing up in goods. PPI is expected to come out cooler after July hot print with y/y around 3.3%, but tomorrow, core CPI (the one that Fed actually watches) is expected to increase due to tariffs by a 0.3% m/m and 3.1% y/y.
Let’s look at what the market prices in for today…